UPDATE 1-French mutual banks fail to win exemption from one-off tax

Reuters Staff

3 Min Read

(Adds parliament vote, finance minister’s comment)

PARIS, Nov 6 (Reuters) - France’s three largest mutual banks failed on Monday to persuade lawmakers to exempt them from a one-off tax aimed at recouping revenue lost through the banning of a corporate dividend tax.

Although the banks said the new charge would hit them disproportionately hard, French Finance Minister Bruno Le Maire said in parliament that an exemption could be unconstitutional.

French lawmakers voted late on Monday to pass the new tax, which the government scrambled to draw up to offset a 10 billion euro ($11.6 billion) shortfall left after Europe’s top court declared the dividend tax unlawful.

The new charge would recoup 5 billion euros, but Credit Agricole, BPCE and Credit Mutuel said their calculations showed they would have to shoulder a fifth of the total burden and benefit only marginally from reimbursement of the cancelled dividend tax.

The government is proposing a levy equivalent to 15 percent of companies’ corporate tax on businesses with revenue of more than 1 billion euros and 30 percent on those with revenue above 3 billion euros.

In a statement on Monday the banks said they would be hit particularly hard because they do not pay dividends to shareholders since they are structured as mutual or cooperative lenders retaining earnings for investment.

“In reality, it’s an unjustified transfer to groups that prefer to invest abroad at the expense of those that do business in France, investing, creating jobs and making money here,” they said.

The hole in the budget caused by the scrapped tax would have jeopardised President Emmanuel Macron’s ambitions of bringing the public sector budget deficit in line with EU rules, allowing France to exit the European Commission’s excessive-deficit procedure.

The Socialist government of former president Francois Hollande introduced the 3 percent dividend tax in 2012 in an effort to encourage companies to reinvest profits.

Companies such as insurer AXA and telecoms group Orange successfully challenged the tax in court.

Because the tax covered dividends paid by the EU subsidiaries of French parent companies, the European Court of Justice (ECJ) struck it down in May on the grounds that it ran against EU law by creating double taxation within groups. ($1 = 0.8629 euros) (Reporting by Leigh Thomas, Emile Picy and Myriam Rivet; Editing by Michel Rose, David Goodman and Adrian Croft)